Jim Cramer, the host of Mad Money, took to the airwaves last Friday to discuss the recent stir caused by DeepSeek in the tech world. Cramer highlighted that we’re in the midst of what he described as the most chaotic two weeks of earnings season.
He noted that last week alone, nearly 20% of S&P 500 companies reported their results, with another quarter of the index set to follow this week. On top of that, Cramer pointed to the selloff in AI stocks sparked by DeepSeek’s revelations, ongoing political turmoil in Washington, and a number of high-profile earnings reports, all of which have made it nearly impossible to keep track of everything happening at once.
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“We learned that maybe just maybe we don’t need to buy as many of those chips as we thought a Chinese outfit called DeepSeek has purportedly figured out a way to get much more out of NVIDIA’s cheaper, lower-end chips, which makes you wonder why should anybody buy the most expensive ones?”
Cramer noted that, according to DeepSeek, it managed to train an AI model for a mere $6 million, a fraction of the hundreds of millions typically required for such endeavors. DeepSeek’s claim was that their cheaper approach might even result in performance that’s as good, if not better, than what’s possible with the highest-end hardware available.
For Cramer, this announcement was unsettling. He reflected on how, for a brief moment, the tech world accepted DeepSeek’s bold claim as fact. The consensus seemed to be that DeepSeek, a company backed by a Chinese hedge fund, had effectively disrupted the semiconductor giant’s ability to command high prices for its products. However, Cramer began to question the full accuracy of this narrative. What if DeepSeek wasn’t being entirely transparent about the true cost of its hardware? What if the $6 million figure they reported was far lower than the actual expenses? He explained:
“And that’s what an article and a known authority called SemiAnalysis said today. This publication, which has covered DeepSeek for longer than most people knew it existed, speculates that the $6 million cost is highly misleading. They say DeepSeek’s real hardware spending, all in, could be more than $1.6 billion. Hmm, I wonder if the PRC’s subsidizing them.”
Jim Cramer Recently Looked Into These 8 Stocks
Our Methodology
For this article, we compiled a list of 8 stocks that were discussed by Jim Cramer during the episode of Mad Money aired on January 31. We listed the stocks in ascending order of their hedge fund sentiment as of the third quarter, which was taken from Insider Monkey’s database of 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Jim Cramer Recently Looked Into These 8 Stocks
8. HSBC Holdings plc (NYSE:HSBC)
Number of Hedge Fund Holders: 14
While Cramer called HSBC Holdings plc (NYSE:HSBC) “good”, he recommended Banco Santander, highlighting the company’s yield.
“Oh, it’s good company. It is at its 52-week high. If I’m gonna buy one of those, it’s a foreign bank, I’m gonna recommend Banco Santander because I think that Ana Botín is doing a great job. You get a little bit better yield.”
HSBC (NYSE:HSBC) offers a range of banking and financial services, including retail banking, wealth management, credit and lending, treasury and cash management, and international trade and advisory services. At the time of writing, HSBC has a yield of 3.81% while SAN’s yield is 4.26%.
7. Summit Therapeutics Inc. (NASDAQ:SMMT)
Number of Hedge Fund Holders: 21
Calling Summit Therapeutics Inc. (NASDAQ:SMMT) a “big spec”, Cramer said, “That company has no revenues. I don’t know and it has not made money. It’s obviously just a very big spec. I can’t, I can’t go there.”
Summit Therapeutics (NASDAQ:SMMT) is a biopharmaceutical company focused on developing therapies that are beneficial to patients, caregivers, and society, with a lead candidate, Ivonescimab, for immunotherapy, and SMT-738, a precision antibiotic for multidrug-resistant infections. While Cramer was discontent with the company, on January 8, Truist began coverage of the stock with a Buy rating and a price target of $35.
The firm highlighted Summit Therapeutics’ (NASDAQ:SMMT) focus on ivonescimab, a promising drug in a new class with the potential to surpass existing oncology treatments. Two important trials for lung cancer are currently underway, and Truist expects positive results that could lead to ivonescimab’s approval in the U.S. and Europe by 2026. While lung cancer is a significant market, Truist believes ivonescimab has broader potential and could make the company an attractive acquisition target for a larger biopharma company.
Bronte Capital stated the following regarding Summit Therapeutics Inc. (NASDAQ:SMMT) in its Q3 2024 investor letter:
“The short book hurt us in many ways. Several deeply junky stocks went up – and one – Summit Therapeutics Inc. (NASDAQ:SMMT) – in which we may have made a mistake – stood out above all. Even excluding Summit, our short book would have faced challenges in September, but this position exacerbated the difficulties.
A little background is necessary. Summit is (or was) a small drug company that we scored as having some suspect associations and hence a short candidate. Our database of bad people in financial markets is very broad. Summit was not such a stock. Our short signals were triggered light amber, not bright red. This meant the company required a bit more analysis…” (Click here to read the full text)
6. Super Micro Computer, Inc. (NASDAQ:SMCI)
Number of Hedge Fund Holders: 33
Cramer seemed strictly against Super Micro Computer, Inc. (NASDAQ:SMCI) as he highlighted the company’s notorious accounting irregularities.
“You know, as you were talking, I started getting very interested. I said, oh, down 75% from its high, that could be very good. Maybe it’s a good company, but you just named a company that had accounting irregularities and accounting irregularities, in my book, always equal one thing, sell, sell, sell (buzzer sound), and always will. And that’s what you have to do with that stock.”
Super Micro (NASDAQ:SMCI) focuses on creating and manufacturing advanced server and storage solutions. Since reporting its accounting issues in August 2024, the stock has declined over 35%.
5. AppFolio, Inc. (NASDAQ:APPF)
Number of Hedge Fund Holders: 37
Cramer praised AppFolio, Inc. (NASDAQ:APPF) and highlighted that the stock is inexpensive.
“Right, right, right. It’s actually a cheap stock. It’s a cheap stock. It’s a good one. I typically find enterprise software is too expensive. That one rocks, you’re onto something.”
AppFolio (NASDAQ:APPF) offers cloud-based business management solutions for the real estate industry, including platforms for property management, leasing, maintenance, accounting, and investment management, with various service tiers to meet different operational needs. On January 30, the company released its earnings report for the full year 2024, showing significant growth in its financial performance.
The report revealed a 28% revenue growth to $794 million while the GAAP operating income reached $136 million. The company also saw a rise in cash flow, with net cash from operations at $188 million.
4. Fair Isaac Corporation (NYSE:FICO)
Number of Hedge Fund Holders: 47
Fair Isaac Corporation (NYSE:FICO) was mentioned during the episode and here’s what Cramer said:
“I gotta tell you… We love FICO. We did a lot of work on this company. We came back and then we had Will Lansing on. I got to speak to Will Lansing… The guy is dynamite. He is a serious practitioner of the game.”
Fair Isaac Corporation (NYSE:FICO) focuses on developing analytics and software tools that help businesses automate and improve decision-making, offering flexible platforms and scoring solutions with predictive analytics for easy integration into workflows. Cramer fully endorsed the company back in October 2024 as he said:
“We’ve talked about the fifth biggest winner, it’s called Fair Isaac, before. In fact, we had the CEO, William Lansing, really impressive fellow, on the show a couple times this year. This one does credit score. You probably know it as FICO, and it’s by far the best at what it does. The FICO score is universally used, and no competitor comes close to its predictive power. I think Fair Isaac could be bought tomorrow morning, even with the stock up 390% in the past two years. And that is how great the company is. Full endorsement.”
3. Western Digital Corporation (NASDAQ:WDC)
Number of Hedge Fund Holders: 66
Cramer called Western Digital Corporation (NASDAQ:WDC) stock cheap as he remarked, “I have read so many upgrades to Western Digital that I have to believe the stock is way too cheap. I’m calling that one money side up.”
Western Digital (NASDAQ:WDC) produces data storage devices, including HDDs, SSDs, and flash-based products for a wide range of consumer, enterprise, and industrial uses. In 2018, Cramer discussed the stocks of WDC and MU and said:
“Going forward, I think that could be the real difference between Micron and Western Digital… When Micron’s stock goes down, the company will be in there buying it hand over fist with you. When Western Digital’s stock goes down, it just goes down.”
From October 2018, Western Digital (NASDAQ:WDC) has gone up over 15% while MU stock has gained more than 125%.
2. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 88
When a caller asked Cramer why Walmart Inc. (NYSE:WMT) is not included in the Charitable Trust portfolio, this was his response:
“Okay, it’s just an honest, great question. I’ve said, I have talked about this with the Walmart people too. The answer is, I thought that if I had Costco and I had TJ, I shouldn’t have Walmart. And the answer is that was wrong. When you think of stock’s going higher, you should break discipline a little and buy the stock. Walmart is amazing and boy, do my kids and I love to shop there. Bargains. Hey, the clothing there by the way, fantastic.”
Walmart (NYSE:WMT) is a major retail and eCommerce brand that provides a broad range of products, including groceries, health items, electronics, clothing, and private-label goods. In November 2024, Cramer’s advice about the company was:
“Now Walmart’s had an amazing ride. It’s up 60% this year. It’s almost in a straight line. This is a big cap company, up 60%. Wait a second, that’s amazing. Now this is the kinda stock where we need to see some sort of pullback before we get too excited.
I think we reached a short term top this week in the stock so I don’t wanna plunge in and just start buying it right now. Even though the great ones like Walmart are going to continue to be good, don’t get me wrong. I bet the numbers will be excellent. Maybe they can even turbocharge the stock from here. But up here for me, you only have my blessing to put a small position on it.”
Since then, Walmart (NYSE:WMT) stock has been up over 16%.
1. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 123
When a caller asked about Adobe Inc. (NASDAQ:ADBE), Cramer replied:
“I’m worried too. You know, Shantanu Narayen is so good. The product is like a Lamborghini versus the guys that it’s up against. I don’t think I wanna sell the stock down here. It generates too much cash. I know that it seems like a tough stock to own. I can’t sell at 21 times earnings.”
Adobe Inc. (NASDAQ:ADBE) is a prominent software firm known for its wide range of products, particularly in digital media creation and document management. The stock has seen a decline of more than 30% over the past year.
Parnassus Investments stated the following regarding Adobe Inc. (NASDAQ:ADBE) in its Q3 2024 investor letter:
“Also in the Information Technology sector, we exited a position in Adobe Inc. (NASDAQ:ADBE) and initiated a new one in Synopsys. Adobe is contending with market cyclicality, rising competition and lofty AI monetization expectations that are unlikely to be met in the near term. We sold Adobe for Synopsys, which faces fewer competitive threats and has room to grow as companies adopt Synopsys software for custom semiconductor design.”
While we acknowledge the potential of Adobe Inc. (NASDAQ:ADBE) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ADBE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
